Need for Legal Aid Services Rises as Funding Drops

May 19, 2020

Legal Services Corporation President Ronald S. Flagg said COVID-19 hit legal aid programs and their clients with a "triple whammy" of shifting to remote work, growing requests for help, and shrinking funding.

Legal aid programs are funded through a mix of sources, including the government, nonprofits, and charitable giving from individuals and businesses. 

Some programs rely heavily on what is known as IOLTA funds, or Interest on Lawyers’ Trust Accounts.

Most lawyers have trust accounts where they hold funds for clients. Since the early 80s, interest on those trust accounts has been pooled by states and directed toward legal aid programs.

When interest rates are high, legal aid programs benefit. But in March, the Federal Reserve slashed its influential interest rate to almost zero. Some legal aid programs estimate they will lose millions of dollars as a result, Flagg said.

"For Southeast Louisiana Legal Services Corporation, about a quarter of the budget comes from IOLTA funds. So, we are expecting somewhere between a $350,000 to $500,000 hit for 2020, which we think we can survive, but 2021 – all bets are off. We’re worried about it, but we’re not going to stop serving people," Laura Tuggle said. 

Some legal aid programs have lost local or state funding, private fundraising dollars or revenue from filing fees due to closed courtrooms.

To deal with the situation, some have sought cash infusions from local businesses and nonprofits. Others are seeking COVID-19 relief funds. The Legal Aid Society of Cleveland, for instance, received a loan from the federal Paycheck Protection Program for $1.5 million, Cotter said. 

As part of the CARES Act package that President Donald Trump signed into law in March, Legal Services Corporation received $50 million to provide grants to legal aid programs.

"It is a helpful first step, but it is nowhere near enough to deal with all of the issues I described," Flagg said. 

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